Why you shouldn’t buy a new iPhone for a stranger in exchange for cash

In the underground world of iPhone trafficking, someone has to take the fall. Unfortunately, it appears to be the homeless and others in desperate need of some quick cash.

9News in Denver, Colorado has shone light on how traffickers who sell unlocked iPhones for a premium outside of the U.S. take advantage of the uninformed.

You have to understand the way carrier contracts work in the states before this system, which 9News has dubbed “iScheme,” makes sense.

When you buy a new iPhone 5s with a two-year contract from the likes of AT&T and Verizon, it costs $200. That’s because the carrier is subsidizing the cost of the device in exchange for your commitment to pay a monthly fee for the length of your contract. When you buy an unlocked 16GB iPhone 5s at full price for $649, the iPhone is contract-free and able to work on any compatible carrier. Just swap the SIM card and you’re good to go.

New and unlocked iPhones are extremely valuable in markets like Russia, where carriers are not allowed to subsidize iPhones. In Russia, the iPhone 4s costs about $500.

So imagine if you could buy iPhones in the states at their subsidized cost, unlock them on the cheap with a third-party, and sell them for more than triple internationally? You would need to also pay all of the carrier contracts for the iPhones you buy.

That is, unless you can pay people to sign the contracts for you.

9News uncovered a guy at the local Apple Store doing some shady business. He would bring people into the store he had paid to buy a new iPhone. The victims would sign the carrier contract, take the iPhone from Apple, hand it off to the scalper, and go on their merry way with cash in hand.

Those that participated in the scheme were assured that they could just cancel their contracts later, which is not true without also returning the iPhone.

Apple unsurprisingly declined to comment on the issue, as did AT&T and Verizon.

Bottom line: if a stranger walks up to you in the mall and offers you cash to buy an iPhone at the Apple Store, say no and report him to Apple employees or mall security. A little common sense goes a long way.